There are few noises louder in
the oil fields than the silence that accompanies a dormant drill
bit.

Lately, the silence is deafening.

As the frustration mounts over the apparent disconnect
between current somewhat-lofty commodity prices and drilling activity,
everybody has a theory:

Lack of prospects.

Risk-aversion is rife in the investment
community.

Mergers.

Prospect of war has frozen activity.

Prices may fall.

There are ample energy supplies.

Et cetera, et cetera.

In fact, there might be some logic for the dearth
of drilling action — and a light at the end of the tunnel.

"Globally, '02 was the first or second warmest year
in history and was second or third in the U.S.," said Jim Wicklund,
managing director of energy research, Bank of America Securities.

"Prices were high, but the expectation and fear was
to have another warm winter," he said. "And there was significant
risk, especially early in the fourth quarter, that we were going
to double-dip into a recession.

"Even when near-term prices are high, no industry
wants to commit capacity-expanding CAPEX in the face of a possible
recession," Wicklund noted.

He pointed out it wasn't until early December that
gas prices hit the $5 mark and the United States was actually experiencing
winter. While this provided encouragement to the oil finders, the
Patch remained quiet for a number of reasons:

By mid-December, budgets were already spent.

No one worked the last couple of weeks
of the month because of the mid-week Christmas and New Year.

Winter had arrived with force, but would
it last?

At the end of January, however, it was still colder
than average. And despite lingering concern over the possibility
of a recession, especially with a war in Iraq still threatening,
the oil industry is significantly encouraged, according to Wicklund.

"The optimism that gas prices will stay above the
economic threshold is very high," he said, "so we will see drilling
activity picking up."

When queried as to the absence of an obvious sign
of a turnaround so far, the veteran industry analyst likened the
situation to receiving a bonus check one day and being asked why
the new addition to the house was not in place the next day.

"Drilling is a process," he emphasized. "New budgets
have been in place less than a month, and the industry only had
confirmation that commodity prices would stay high in the last month,
i.e., weather."

History plays a role in this scenario as well.

The rig count drops from December to January every
year. In fact, the January average has been lower than the December
average each year since 1949, according to Wicklund.

He noted that even though higher commodity prices
ensure to a large extent that drilling activity will pick up, they
only really ensure it will pick up in the seasonal fashion it usually
does, which would be March or April, possibly February. And normally,
once it's bottomed, it will continue to increase sequentially through
year-end.

"You would never expect to see drilling activity
pick up in January," Wicklund noted, "and it will drop again this
year from December to January.

"So the point is not why aren't we drilling — in
December there was no money, in January no urgency, e.g., it's 10
percent more expensive to operate in winter.

"The real question is will they begin drilling late
in the first quarter, as I think they will with gas prices where
they are," Wicklund said. "If not, then you have a problem."

Given the increasing demand for natural gas, particularly
in the United States, and the tight (and iffy) crude oil supply
situation — even OPEC only has two member countries with any excess
available production capacity, at least at the moment — it has
to be only a matter of time before drilling must take place.

It's simple economics.

"If there's no drilling, the price goes up," Wicklund
said, "and if the price goes up there will be a drilling response."